Do business with Mr. Market only when it serves Your Interests.

The stock of CMGI, an "incubator" or holding company for Internet start-up firms, went up an astonishing 939.9% in 1999. Meanwhile, Berkshire Hathaway - the holding company through which Graham's greatest discipline, Warren Buffett, owns such Old Economy stalwarts as Coca-Cola, Gillette, and the Washington Post Co. - dropped by 24.9%.

But then, as it so often does, the market had a sudden mood swing. The stinkers of 1999 became the stars of 2000 through 2002.

As for those two holding companies, CMGI went on to lose 96% in 2000, another 70.9% in 2001, and still 39.8% more in 2002 - a cumulative loss of 99.3%. Berkshire Hathaway went up 26.6% in 2000 and 6.5% in 2001, then had a slight 3.8% loss in 2002 - a cumulative gain of 30%.

Lessons:

By refusing to let Mr. Market be your master, you transform him into your servant. After all, even when he seems to be destroying values, he is creating them elsewhere.

• In 1999, the Wilshire 5000 index - the broadest measure of U.S. stock performance - gained 23.8%, powered by technology and telecommunications stocks.
• But 3,743 of the 7,234 stocks in the Wilshire index went down in value even as the average was rising.
• While those high-tech and telecom stocks were hotter , thousands of "Old Economy" shares were frozen in the mud - getting cheaper and cheaper.

The intelligent investor shouldn't ignore Mr. Market entirely. Instead, you should do business with him - but only to the extent that it serves your interests.

Mr. Market's job is to provide you with prices; your job is to decide whether it is to your advantage to act on them. You do not have to trade with him just because he constantly begs you to.

Ref: cc Intelligent Investor by Benjamin Graham